Evidence is trickling in that the bandwidth boom the expected explosion of consumer and business use of data networking just hasn't happened.
Bought too much bandwidth? Youre not alone.
Evidence is trickling in that the bandwidth boom the expected explosion of consumer and business use of data networking just hasnt happened.
Although more people are going online every day and more companies are using data networking for more applications, the total of these activities may not be enough to sustain the number and the size of todays data communications networks.
Executives who run various backbones openly admit that the percentage of their pipes in use runs in the low single digits. Vendors that serve large bandwidth users say those pipes are just 30 percent full. The conditions of WorldComs deal to acquire Digex that require the selling of Intermedia Communications network assets remain unmet: There are no takers.
Bankruptcy filings for firms such as 360Networks and Exodus Communications suggest that the demand for bandwidth in all forms from colocation facilities to undersea capacity is dwindling. And warnings from operators such as Global Crossing, which is in talks to merge with its Asian affiliate to compensate for low dark-fiber demand, is a sign that the global economy simply hasnt produced as much data as expected.
Some large carriers say those dynamics dont exist. A WorldCom spokeswoman says the department charged with moving large pipes has seen no customers that want to renegotiate their bandwidth contracts or shut down excessive pipes.
But if more customers do indeed begin shutting down useless pipes, the aftershock may result in bankruptcies across the entire data networking chain. And vendors that have leased out equipment to facilitate new network builds may be hurt even more as customers look to downgrade their communications equipment to less-expensive boxes.
Shut It Off!
Vendors that sell hardware to optimize bandwidth use say companies that buy several pipes from different communications providers are looking to shut some of them off.
"In todays macroeconomic climate, there are a lot of companies that are in this overprovisioned state," says Eric Wolford, senior vice president of marketing of netVmg, a vendor that builds boxes that manage Border Gateway Protocolbased traffic between different data links.
Many companies have overprovisioned because they fear that their apps performance would degrade due to peaks in traffic an equivalent of flash flood in data terms, Wolford says. NetVmg is among a growing number of vendors that suggest that better routing could be just as effective as provisioning raw bandwidth.
Wolford wouldnt name names, but he told the tale of a Fortune 500 company that turned off some of its 11 OC-3 (155-megabit-per-second) connections after analysis revealed that its total peak traffic could be handled by just one of those pipes.
"They have to reduce the amount of capacity in order to reduce cost," Wolford says. Research on 7,000 companies with multiple buildings showed that less than 30 percent of the capacity purchased is actually used.
The Carrier Side
The same dynamic is apparently at work at the service provider level, where large pipes are ordered months in advance, with network engineers running back-of-the-envelope risk analysis to predict how much bandwidth they might need months if not years in advance.
The reason for taking such financial risks is the archaic method of provisioning large pipes, which comes straight out of the telephony world. Advances in fiber-optic technologies, such as meshed networks, may help to provision loops more quickly.
"Most companies overbuild their networks in 18-month intervals," says David Diaz, president and CEO of International Wire Communications and co-architect of BellSouths Multimedia Internet Exchange optical network access point. "With fiber, they are likely to plan even further."
Interconnecting long-haul and carrier fiber networks is expensive and time consuming. BellSouth, for example, has more than 9,000 Synchronous Optical Network rings in South Florida alone.
Two years ago, most pundits agreed that data traffic would double every four months or so. Todays oversupply appears to be the result of transferring that geometric growth expectation to the infrastructure.
But only about 20 percent of bandwidth providers, which move about 80 percent of all data traffic, have excess. AFN Communications is building connectivity in the markets other than the top 50 cities in the U.S.
"There are three or four routes that have up to 20 competitors," says Gordon Martin, AFNs. CEO. "Thats why we are still working through an inventory correction between some cities."